Credit where it's due

What do three very different firms such as Microsoft, Gap and Adobe have in common? Any offers? The answer is that they have all abolished their annual performance reviews for staff.

What a great idea, I hear you all say.
I certainly remember that when I used to be subjected to an annual review,
I used to hate it, but not nearly as much as I hated filling the forms in beforehand.

The hours I spent drafting and redrafting answers to banal questions such as, what is your greatest weakness? What are you going to do to improve departmental profitability? How could
I appear confident and assertive without being arrogant and aggressive?

For the lucky few, those days are now over and I'm sure that it must save a lot of time for everyone concerned. However, what is replacing them and why?

To answer this effectively, one has to understand what the point is in having an annual appraisal in the first place. The basic reason for an appraisal has always been to assess a person's performance and grade them, the hope being that it will lead to an improvement in the firm's profitability. However therein lies the problem.

'Constructive' criticism

Appraisals are orientated towards a critical analysis of the staff members' performance, which will no doubt leave him demotivated. I remember attending one annual appraisal at the end of which I was actually promoted, but the whole interview was so negative that I left the meeting feeling thoroughly depressed. Goodness knows how the people who were not promoted felt when they left their appraisals. Additionally, the process is time consuming and rarely leads to any change in behaviour or improvement in the financial performance of the firm.

The very essence of appraisals that categorise people and grades them, often distilling a whole years performance across a range of sectors to a number or a letter, is contradictory to what will benefit the firm, such as collaborative working and empowerment.

Surveys have shown that most workers rate their contribution very highly. In fact approximately 80 per cent of workers regard themselves as being top quartile performers.

Telling them that they are not is unlikely to improve their work ethic or dedication to the firm. I remember as a junior back in the mists of time, receiving criticisms raised in appraisals that had not been mentioned during the year; that used to infuriate me.

In fact, my all-time favourite comment came at the end of my first year at a major accountancy firm, when my reviewer wrote: 'Too easily distracted by senior members of staff who should know better'.

A new order

So what should firms do to move beyond annual appraisals, while retaining the original intentions? First, they need to replace annual appraisals with a process that ultimately benefits both the employer and the employee. Appraisals should be an ongoing process throughout the year. The person should know roughly how he is doing and how he can improve and develop, at any given time. There is little to be gained by taking a rear-view mirror approach to performance.

Each year could begin with a set of achievable, measurable targets and time frames being agreed. These would then be monitored throughout the year. As these agreements become more sophisticated, they could link in with the firm's business plan.

Peter Drucker goes further than that and suggests that a junior employee should write a 'manager's letter' each year to his boss, in which he outlines his agreed objectives, how he is going to achieve them, what the obstacles are, and how the firm and his manager can help him.

This can then be reviewed after six months. It can also be useful for the junior employee to understand the pressure and objectives that his boss is subjected to.

I know from personal experience that as a partner, I now finally understand what my bosses wanted from me when I was a junior, and why I used to annoy them so much.

So why not take a critical view of your firm's appraisal process. Is it really improving the firm's profitability, is it motivating and developing staff? If not, it may be an opportunity to try a new approach. 

Geraint Jones is a tax partner at BKL Tax

He writes the regular in-practice article on doing business for Private Client Adviser